Russian stocks fell to their lowest level in a month today as Moscow rekindled fears of martial law under a new bill approved by Russia’s lower house today and plans to hold referendums in Russian-controlled areas of eastern Ukraine accelerated.

According to the Kommersant newspaper, the Moscow Exchange index fell by more than 10%, dropping below 2200 points.

Shares fell to their lowest level since mid-August, with the dollar-denominated RTS index down 5.2 percent to 1206.5 by 1309 GMT. The Moscow Exchange index in rubles fell by 5.1% to 2305.7 points.

The Russian parliament on Tuesday approved a bill to toughen penalties for a number of crimes, including desertion, damage to military property and disobedience, if committed during conscription or in the course of hostilities.

“Indices are clearly falling amid fears over the possibility of military conscription and martial law,” said Kirill Komarov, an analyst at Tinkoff Investments, adding that Tuesday’s crash is likely to be the Moscow Exchange’s biggest drop since June 30.

“They are fueled by news about the upcoming referendums … as well as a presidential decree to increase defense production.”

Russian-controlled regions in eastern Ukraine have announced plans to hold referendums on joining Russia later this week, with an ally of President Vladimir Putin saying the vote would forever shift the geopolitical landscape in Moscow’s favor.

“The liquidation was caused by a geopolitical factor,” BCS Express said in a statement. “In addition, there are reports in the media that the government plans to impose an additional tax on oil, natural gas and LNG exporters from 2023.”

Energy companies dominate the Russian blue chip index.

The ruble remained stable, keeping the exchange rate at around 60 rubles against the dollar and the euro. Against the dollar, the ruble remained stable at 60.15 rubles per dollar and appreciated against the euro by 0.3% to 59.98 rubles per euro.

The Russian currency is expected to rise due to the tax season at the end of the month, when Russian exporters usually convert their foreign currency earnings into rubles to make payments to the state treasury. The peak of payments falls on September 26th.

“We note that the dynamics of trading, according to our estimates, despite the beginning of the key week before the payment of taxes by exporters, may be partly due to the lack of foreign exchange liquidity among a number of players,” the analyst notes. Promsvyazbank Egor Zhilnikov.

Zilnikov said that after the central bank cut interest rates by 50 basis points to 7.5% last week, the dollar’s base turned negative overnight, “meaning that exchanging dollars for rubles has started to cost banks more than direct loans.” in rubles.

The ruble has been the most profitable currency in the world this year, helped by emergency capital controls imposed by the Russian central bank in an attempt to stop the mass liquidation.

^{Source: APE-MEB, Reuters, AFP.}